India’s potential in the changing Australian geopoliticalenvironment

The deterioration in the Australian geopolitical environment dates to 2018 over growing concerns in Australia of Chinese influence in the Australian society, government, universities and media, as well as actions in the South China Sea, East China Sea and the Western and Southern Pacific. China has systematically invested in Australia in mining with a focus on lithium and rare earths, infrastructure like the Darwin port and LNG, agricultural land with water resources, electricity and energy grids, housing and real estate. In 2018, over security concerns Australia banned Huawei from its 5G network. National Security laws were passed to stop overt foreign interference into domestic affairs of Australia and enabling enhanced oversight of foreign buyers of agricultural land and electricity infrastructure. In March 2020, during the Covid 19 pandemic, Australia had to promulgate rules to scrutinize foreign takeovers of Australian companies, taking into account vulnerability of companies to buyouts by state owned enterprises from authoritarian regimes.

Over the past year, without linking directly it with Australia’s demand for an inquiry into the origin of the Coronavirus by the WHO, China has targeted at least a dozen Australian exports — including cotton, coal, barley, beef, wine, lobster, sugar, copper and log timber — amounting to roughly $25 billion. However, overall exports of Australia to China are down by just $2 billion over the past year. Despite fears, given the dependence of China on Australian iron ore, it is unlikely to be a target sector. China is dependent on cheap LNG imports from the Darwin port in Australia and cancellation of current contracts will draw heavy penalties. Australian coal exports to India have gone up. China cancelled the meeting of the Economic Cooperation group called by Australia to review bilateral economic relations, but that group has not met since 2017.

In December 2020, the Australian Parliament passed legislation which allowed veto powers to the federal government over foreign arrangements by states, local bodies and universities in a broad range of sectors such as infrastructure, trade cooperation, tourism, cultural collaboration, science, health and education, including university research partnerships. This allowed Foreign Minister Marise Payne, on 21 April 2021 to cancel two MOUs signed by the state of Victoria under the Dan Andrews led Labor government in 2018 and 2019 with China’s National Development and Reform Commission on Chinese participation in infrastructure projects under China’s Belt and Road initiatives. Theoretically, the legislation can now allow the federal government to review and overturn MOUs between China and the state governments of Western Australia, South Australia and Tasmania in sectors ranging from investment, science cooperation and access to the Antarctic. An Australian parliamentary inquiry has called on the government to consider reversing the 99- year lease for the port of Darwin from a Chinese company under the new Foreign Relations Law. Defense officials are checking if the Land Bridge Group, owned by Chinese billionaire Ye Cheng, with links to the Chinese PLA, should be forced to give up its ownership of the port of Darwin on national security grounds. Chinese government backed Confucius Institutes at Australia’s public universities which have also become a subject of controversy and put under scrutiny.

On the other hand, Defense Minister Peter Dutton has recently warned that a conflict over Taiwan could not be overlooked. Chinese media has accused Australian politicians of colluding with “terrorists” in Xinjiang. Prime Minister Scott Morrison visited Darwin a few weeks ago where he promoted a $747 million upgrade of defense training bases in the Northern Territory. The Australian government defense strategic update last year had also warned that a “prospect of high intensity conflict in the Indo-Pacific, while still unlikely, is less remote than in the past and under its defense Strategic update, the defense budget of Australia has been increased by 40 % last year. It is reviewing Australia’s $270 billion investment in attack class submarines, the future frigate programme and offshore patrol vessels over the coming decade. The arrest of Cheng Lei, an Australian national and anchor for China’s English language state broadcaster, in February 2021, accused of “supplying state secrets overseas”; Australian statement on the “Five Eyes” over Chinese violations of its legally binding international commitments on Hongkong; the tweet late last year by Chinese spokesperson Zhao Li Jian of an image showing an Australian soldier putting a knife to the throat of a child in Afghanistan have all soured bilateral relationship.

China has also invested at least $1.7 billion in aid and loans to the Pacific Islands in the past decade in transport and utility infrastructure. In response, Australia unveiled a $1.5 billion infrastructure fund for the region in 2018. Now the Pacific Islands Forum based in Fiji is split, prompting five island states to withdraw from the grouping, allegedly induced by China’s promise for loans for tourism and infrastructure.

As Australia looks elsewhere to hedge its interests India offers excellent prospects for collaboration in critical areas like science, vaccine development, pandemic management, space and defence, critical minerals and related technologies, water resources, training and education, the circular economy, waste to wealth processes, grains management and logistics, and cyber technologies. India needs Australian commodities like lithium and rare earths, coal and LNG, as well as technology to address challenges in financial inclusion, healthcare and education. Recent Indian reforms in the mining, healthcare, agriculture, power, defence, space, electronics and textile sectors, and incentives announced for 13 sectors under a Production Linked Incentive Scheme to boost manufacturing are good news for Australia. Corporate tax rate has been slashed, as India simplifies difficulties in land acquisition, labor laws reform, and liquidity to attract foreign investments. Their trade ministers have met twice and formally launched a Supply Chains Resilience Initiative with Japan on 27 April 2021.

Australia therefore, needs to collaborate with a wider network of likeminded partners in the Indo Pacific, and must quickly advance practical cooperation in maritime safety and security with India and France in a trilateral framework. It needs to take forward the SCRI with Japan and India. Australia should also see the Quad as an important component of its foreign policy which can become a pivot for coordinating the vaccination response and roll out, maritime security, infrastructure, supply chain resilience, counter terrorism, humanitarian assistance and disaster relief, cyber and critical technologies, while strengthening deterrence through a defensive posture with an emphasis on the core of the Indo Pacific (as Australia sees it) across South East and South Asia, the northeast Indian Ocean and the South Pacific.

Anil Wadhwa is a former Secretary (East) in the Indian Ministry of External Affairs, and former Indian Ambassador to Italy, Thailand, Oman and Poland. He is the author of the Australia Economic Strategy Report commissioned by CII and KPMG. The views expressed are personal.

By Ambassador (Retd.) Anil Wadhwa